Sangui Forum: "Need to Shift Fair Trade Criminal Penalties to Administrative Sanctions Except for Collusion"

'The 5th Fair Competition Forum' Held on the 1st
Topic: 'Current Status and Improvement Measures of the Penal System'

At the '5th Fair Competition Forum' held on the 1st at the Korea Chamber of Commerce and Industry Hall on Sejong-daero, Woo Tae-hee, the Executive Vice Chairman of the Korea Chamber of Commerce and Industry, is delivering a greeting. Photo by Korea Chamber of Commerce and Industry

[Asia Economy Reporter Donghoon Jung] As the government is pushing for improvements in economic penalties, there is a need to evaluate whether the penalty system under the Fair Trade Act aligns with the general principles of criminal law. In light of this, some argue that certain penalty provisions should be abolished or converted into administrative sanctions.

The Korea Chamber of Commerce and Industry (KCCI) held the '5th Fair Competition Forum' on the 1st, discussing the 'Current Status and Improvement Measures of the Penalty System under the Fair Trade Act.' The KCCI Fair Competition Forum was established to continuously examine issues in fair trade policies that disadvantage Korean companies in global competition and to discuss improvement measures.

Experts participating in the forum included Professor Sanghyun Lee of Soongsil University, Attorney Hansoon Choi of Sejong Law Firm, Professor Nanseolheon Choi of Yonsei University, Attorney Namsu Kim of Kim & Chang Law Office, and Professor Sunok Lee of Chung-Ang University. Economic sector panelists included Woo Taehee, Executive Vice Chairman of KCCI, Lee Hyunghui, Chairman of SK Supex SV Committee, and executives responsible for fair trade in major companies. Representing the government, Song Sangmin, Director of the Competition Policy Bureau at the Korea Fair Trade Commission, also attended.

Major Countries Apply Penalties Mainly to Cartels

Professor Lee, who gave the keynote presentation, explained, “Historically, the Fair Trade Act has introduced penalties whenever new behavioral regulations were established, resulting in broad penalty provisions covering most types of conduct today.” He added, “Major countries either have no penalty provisions or impose penalties only on certain conduct types such as cartels. Some countries like the United States have penalty provisions beyond cartels, but actual cases of punishment are rare.”

Professor Lee noted, “The government is currently promoting improvements to economic penalty provisions and announced 32 penalty provisions across 17 laws as the first phase. However, it is regrettable that only three provisions related to the Fair Trade Act, such as violations of reporting obligations for establishing or converting holding companies, were selected as improvement tasks.”

Attorney Hansoon Choi commented, “As the era shifted from emphasizing economic efficiency to emphasizing economic justice, it seems there was an inevitable need to employ strong measures like penalties.” He argued, “The Korea Fair Trade Commission should fully consider that penalties must be a last resort when deciding whether to exercise the right to prosecute.”

Professor Sunok Lee agreed that “the excessive use of administrative penalties is undesirable,” but also stated, “Instead of simply comparing the number of penalty provisions in the Fair Trade Act between major countries and Korea, it is necessary to carefully examine the reasons for introducing penalty provisions for violations of the Fair Trade Act, its history, and the functions of penalties, which differ from other countries.”

Criteria for Evaluating the Legitimacy of the Penalty System: ① Legality Principle ② Clarity Principle ③ Appropriateness Principle ④ Subsidiarity Principle

Professor Lee said, “The general principles of criminal law can be applied to evaluate the legitimacy of penalty provisions under the Fair Trade Act,” presenting four evaluation criteria: ▲ Legality Principle (prohibition of broad delegation) ▲ Clarity Principle ▲ Appropriateness Principle (responsibility principle, proportionality principle) ▲ Subsidiarity Principle.

Attorney Namsu Kim argued, “For the government’s regulatory innovation to be effective, policies need to be pursued in a way that enhances the clarity of economic penalty provisions.” He added, “Improving the clarity of economic penalty provisions will enable companies to engage in more active business activities, which will greatly help revitalize our economy.”

Meanwhile, Professor Nanseolheon Choi agreed with the validity of the presented evaluation criteria but emphasized, “In the case of the Fair Trade Act, due to the nature of competition law, additional consideration must be given to the impact on the market and consumers.”

Attorney Hansoon Choi also stated, “Unlike traditional criminal offenses, in the economic law domain where interpretation and application may vary depending on temporal and economic circumstances, it is necessary to pay attention to legal revisions and law enforcement to ensure the proper implementation of the general principles of legality.”

Review of Current Penalties Needed: Holding Company Activity Restrictions, Failure to Submit Business Reports, Certain Unfair Trade Practices, etc.

Professor Lee argued, “Based on the four principles, when reviewing the legitimacy of the penalty system under the Fair Trade Act, some types should be decriminalized or converted from criminal sanctions to administrative sanctions such as fines or penalties.” He suggested reviewing penalties related to ▲ violations of holding company activity and establishment restrictions, ▲ failure to submit business reports, ▲ certain unfair trade practices, and ▲ circumvention acts (related to corporate mergers/economic power concentration suppression).

Attorney Hansoon Choi responded, “It is worth considering administrative sanctions instead of penalties for violations of acts aimed at achieving administrative objectives, distinguishing them from cases that directly infringe on consumer interests and balanced national economic development.” He added, “It is necessary to refer to other administrative laws where fines are imposed for violations such as failure to report or false reporting.”

Professor Nanseolheon Choi further argued, “The issue of retaining penalties for prohibitions on mutual shareholding, new circular shareholding, debt guarantees, and restrictions on voting rights of financial companies, insurance companies, and public interest corporations also needs to be reconsidered from a mid- to long-term perspective.”

Meanwhile, Professor Sunok Lee stated, “While converting simple administrative duty violations such as reporting obligations for establishing or converting holding companies to administrative regulations is appropriate, it is necessary to carefully examine the practical effects of abolishing penalties, since penalties hold the responsible representatives accountable for violations, whereas administrative sanctions such as fines are attributed to the company and may lead to damages to third parties such as shareholders and creditors.”

Woo Taehee, Executive Vice Chairman of KCCI who chaired the discussion, said, “The current penalty provisions under the Fair Trade Act are excessively broad compared to major countries.” He added, “Unreasonable penalty provisions affect corporate competitiveness, so it is necessary to reconsider cases of simple administrative duty violations unrelated to public safety or life.”

This content was produced with the assistance of AI translation services.